Mike Moffatt: If It’s a Housing Crisis, Why Are We Building Fewer Homes?

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For years, Canada’s federal and provincial leaders have been using the phrase “housing crisis” in speeches, media interviews, and policy announcements. Yet despite all the political attention, new housing construction is trending sharply downward. That’s the core message from economist Mike Moffatt, who warns that without a major shift in policy and financing, the country is on track to deepen its supply shortfall for years to come.

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CMHC Lowers Housing Start Forecast

The Canada Mortgage and Housing Corporation (CMHC) has released its Summer 2025 Housing Market Outlook, and the numbers are not encouraging. Housing starts — the number of new homes builders begin constructing — are now projected to fall to around 220,000 units by 2027. That’s almost 20% below the 2021 peak of more than 270,000 starts, and CMHC has cut its February 2025 forecast by another 13,000 units.

This is not simply a short-term fluctuation. It represents a sustained slowdown at precisely the time Canada needs more homes to accommodate a growing population. Moffatt points out that Ottawa’s goal of doubling construction to 500,000 homes a year over the next decade looks increasingly unrealistic.

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Ontario and B.C. Lead the Decline

The slowdown is not evenly distributed across the country. Two of Canada’s most supply-constrained provinces — Ontario and British Columbia — are experiencing the sharpest declines:

• Ontario: Housing starts are down 25% in the first half of 2025 compared to the same period in 2024. The drop is most pronounced in the Greater Toronto Area (GTA), where pre-construction condo sales have collapsed by about 90% compared to the 10-year average. Single-family home starts are down 74%, a dramatic pullback that will worsen the region’s affordability crisis.
• British Columbia: Starts have fallen 8% year-over-year in the first half of 2025, adding to affordability pressures in cities like Vancouver and Victoria.

With two of Canada’s largest and most expensive housing markets building far fewer homes, national supply goals are quickly slipping out of reach.

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Why the Slowdown Is Happening

According to Moffatt, the reasons are straightforward — and troubling:

1. High Interest Rates: Elevated borrowing costs have discouraged both developers and buyers. Many pre-construction buyers can’t qualify for financing at today’s mortgage stress-test levels, causing projects to stall or get cancelled.
2. Weak Economic Conditions: Sluggish GDP growth, uncertainty around trade, and slower immigration inflows in 2025 have softened housing demand, especially in the investment property segment.
3. Developer Risk Aversion: Builders are unwilling to launch projects when pre-sales are weak, as they risk being stuck with unsold inventory.
4. Construction Costs: Material prices remain high, and labour shortages persist, further eating into project margins.

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The Policy Disconnect

Moffatt’s frustration stems from the gap between political rhetoric and on-the-ground results. Governments across Canada have made high-profile announcements about increasing supply, streamlining permits, and providing incentives for affordable housing. But in practice:

• Permitting Delays are still common, especially in urban municipalities.
• Zoning Reforms are inconsistent and often face local opposition.
• Federal and Provincial Incentives have not been enough to offset the higher cost of capital in the current interest rate environment.

The result? Targets are set, press releases are issued, but the cranes aren’t going up fast enough.

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The Bigger Picture: Immigration and Demand

Canada’s population growth has slowed somewhat in 2025 compared to the record inflows of 2022–2024, but it’s still outpacing housing completions. Even with lower immigration, the demand for housing remains elevated due to:

• Household formation among younger Canadians
• Migration from smaller cities to large urban centres
• Demand for larger homes as remote and hybrid work patterns persist

When supply growth lags behind demand growth for years, the inevitable outcome is upward pressure on prices.

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Regional Impact: GTA and Vancouver

Greater Toronto Area (GTA)

The GTA’s pre-construction market has seen the steepest collapse in sales in decades. Many projects launched in 2022–2023 are now shelved, leaving buyers with fewer options. Resale listings have increased slightly, but not enough to offset the drop in new supply.

Greater Vancouver

The Vancouver area is experiencing a more moderate slowdown, with starts down 8% and sales softening. Active listings have risen, giving buyers more negotiating power, but with prices still high, affordability remains a challenge.

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What This Means for Buyers and Homeowners

For prospective buyers, the short-term picture is mixed. Slower demand and higher inventory in some regions may create negotiating opportunities. However, over the medium to long term, fewer housing starts today mean less supply and potentially higher prices in the years ahead — especially if interest rates eventually fall and demand rebounds.

Homeowners looking to sell may face a more competitive market in the short run, but sustained undersupply could support prices in the long term.

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Implications for Mortgage Rates and Lending

From a financing perspective, the housing start slowdown is one more data point for the Bank of Canada to consider as it weighs future rate decisions. While inflation trends will dominate the BoC’s thinking, weaker housing construction could be seen as a drag on economic growth, potentially supporting the case for future rate cuts.

For lenders and brokers, the environment remains challenging:

• Mortgage originations from new-build projects will be lower.
• Clients may need more education on the benefits and risks of buying in a slower market.
• Investors could face delays and cost overruns if projects they’ve backed are stalled.

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Key Takeaways

• anada’s housing starts are in a sustained decline — CMHC now forecasts just 220,000 by 2027, 20% below the 2021 level.
• Ontario and B.C. are leading the slowdown, with steep drops in the GTA’s pre-construction condo and single-family segments.
• High interest rates, weak demand, and rising costs are discouraging developers from launching new projects.
• Policy targets are far from reality, as permitting, zoning, and financing barriers persist.
• Buyers may find short-term deals, but the longer-term impact could be higher prices due to supply constraints.